Gold Surges to $4,395 as Fed Hike Odds Drop
The price of gold has surged to near $4,395 in early Asian trading hours on Monday, as expectations for a US Federal Reserve interest rate hike have dropped. The decline in Fed hike odds comes after softer-than-expected US Retail Sales data was released on Friday.
US Retail Sales declined by 0.6% month-over-month (MoM) in July, versus an expected 0.1% increase. This has contributed to evidence that inflationary pressure is easing, weighing on the US dollar and supporting gold prices.
Money markets have priced in a nearly 33.1% chance of a September Fed hike, which could reduce the opportunity cost of holding non-yielding bullion like gold. However, analysts at Commerzbank caution that the path higher for gold will not be smooth, citing price volatility and potential profit-taking.
Despite this, Commerzbank remains bullish on gold's medium-term outlook, citing renewed buying interest from ETF investors as a positive factor. The constructive tone of gold's technical analysis also remains intact, with support levels holding above the 100-day simple moving average and the Bollinger middle band.